Disney’s Playdom to Pay Three Million Dollars in FTC Settlement

Disney’s Playdom, a social gaming platform, has agreed to a $3 million settlement for claims from the Federal Trade Commission that the company had illegally collected and disclosed personal information about children.

The specific complaint was that Playdom had violated the Children’s Online Privacy Protection Rule (COPPA). According to the FTC, Playdom, via its acquisition of Acclaim Games in May of last year, collected kids’ e-mail addresses, names, locations and other private information, and then made that information public without the consent of parents.

Said Jon Leibowitz, chairman of the FTC:

Let’s be clear: Whether you are a virtual world, a social network, or any other interactive site that appeals to kids, you owe it to parents and their children to provide proper notice and get proper consent. It’s the law, it’s the right thing to do, and, as today’s settlement demonstrates, violating COPPA will not come cheap.

The claims also said that that at least 403,000 children were affected, and the numbers could even be as high as up to 821,000 more. The information was collected through various online worlds such as Pony Stars, Age of Lore, 9Dragons, Dance Online, My Diva Doll, and other games and activities.

Disney, who paid $563 million for Playdom in August, also said that they even took a $34 million charge related to the purchase of Playdom, and CFO Jay Rasulo said the acquisition of Playdom was one of the reasons Disney had disappointing fiscal second-quarter financial results.

In fact, Disney’s Interactive unit, which includes Playdom, lost $115 million in the quarter, making it the worst performing division.

Now, Disney is faced with a $3 million FTC settlement, along with Howard Marks, Acclaim’s former CEO and co-defendent in the complaint. Disney declined to comment whether they would pay the full amount of the settlement.